Consider two developed and developing countries, the population growth rate of developed countries is 2 percent per year and saving rate of 30 percent. The developing country has a population growth rate of 5 percent and saving rate of 10 percent. Suppose that initial technology of the developed country is 10 times higher than that of the developing country and that both countries have the same productivity growth and depreciation rate: g = 0.02 and 6 = 0.03. Assume that a = 1/ 3. In a steady state, how much is the developed country's GDP per capita larger than the developing country?

Consider two developed and developing countries, the population growth rate of developed countries is 2 percent per year and saving rate of 30 percent. The developing country has a population growth rate of 5 percent and saving rate of 10 percent. Suppose that initial technology of the developed country is 10 times higher than that of the developing country and that both countries have the same productivity growth and depreciation rate: g = 0.02 and 6 = 0.03. Assume that a = 1/ 3. In a steady state, how much is the developed country's GDP per capita larger than the developing country?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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